GE Healthcare Financial Services exec scans the looming healthcare economy

CHICAGO – The faltering economy and burgeoning federal budget deficit may be wreaking havoc on hospital planning and purchasing with a growing number of organizations circling the wagons until the dust clears.

What that means, according to recent studies by the American Hospital Association, is that more than half of hospitals either are postponing or rethinking hospital improvement projects and acquiring "critical" equipment. The ripple effect can only lead to higher prices for products as demand and investment slides.

At the 2008 Radiological Society of North America (RSNA) conference and exhibition in early December, Healthcare Purchasing News Senior Editor Rick Dana Barlow sat down with Antoinette Gawin, chief marketing officer, GE Healthcare Financial Services in the company’s massive exhibit space in the South Hall of Chicago’s McCormick Place to gauge her impressions and glean her insights as to what the future may hold for hospital finances, particularly as it relates to supply chain activities.

Gawin has spent more than two decades at GE in a variety of high-level executive management roles for several divisions, before helping to shape the company into a "customer-focused organic growth engine" from an "engineering-led organization."

In her current role, Gawin oversees growth strategies, including new market identification and penetration, portfolio management and functional marketing support. Prior to this role, Gawin spent five years at GE Healthcare leading strategic marketing and established its customer advocacy function.

HPN: Now that we’re officially in a recession that federal officials have acknowledged began in 2007, what does this mean for hospitals and other healthcare facilities?

Antoinette Gawin

GAWIN: Near-term, I believe the biggest impact will be decreased volume as people defer discretionary procedures, or hold off a bit longer on required surgeries that require significant out-of-pocket expenses or time off from work. From a macro perspective, as unemployment rises, I would anticipate an increase in bad debt as folks lose insurance coverage.

We’ve already seen an impact in the market as public insurers have reneged on their commitments. This previously enabled the daily cash flow at many large healthcare systems. GE is one of the few private entities that has the capability to step in, but given the daily fluctuations in policy that impact immediate cost of capital, waiting for the market to settle may be the most prudent course of action.

I anticipate that capital will be deployed cautiously, with an emphasis on sound operations and underlying volume fundamentals. As an example, are you in a strong competitive position locally? This could mitigate volume loss in a downturn.

In terms of qualifying for capital, you may see more covenants that encourage operational improvements, protections against variable rate volatility and increased collateral requirements. I haven’t seen anything as specific as medical error reductions, but I do know that the various reform proposals being debated in congress do include differing reimbursement schemes to encourage adoption of patient safety measures.

Historically, providers delay technology purchases in an election year. As healthcare grows as a component of our federal deficit, this increases the pressure to take cost out of the system. Given the size of our federal deficit, and more importantly, the enormous concern of fiscal solvency at the state level, funding for providers will be scrutinized even more.

The [American Hospital Association] recently reported that 45 percent of hospitals are delaying technology and clinical investment. Fifty percent of hospitals indicated they are cutting administrative and personnel costs, and 27 percent are decreasing their services. This has an obvious ripple effect through the supply chain.

Various groups – Bacchus, Kennedy, Gingrich, etc., have developed white papers or road maps outlining approaches to reform. A few common elements that appear to have bi-partisan support include: 1. Expanding coverage for children. SCHIP was vetoed by [President] Bush based on immigration concerns, but had majority in both houses; 2. Providing funding incentives to adopt EMR/EHR and IT infrastructure; 3. Harmonizing the payment system between [Medicare Advantage], [Veterans Administration], inpatient/outpatient, etc. As an illustration, Kaiser Foundation reports that a procedure performed on a patient enrolled in Medicare Advantage costs 12 percent to 17 percent more than the national average.

Obama and Daschle are both pragmatic leaders, who have clearly indicated that healthcare is on their agenda. It has not been high priority on the agenda of recent administrations. Obama’s role on the Senate HELP committee, which appropriates significant dollars for healthcare, has given him more detailed perspective on the issues. Compared to the efforts under the Clinton administration, not only have there have been broader bipartisan efforts and industry engagement, the sheer size and growth rate of our healthcare spending, and underlying demographic demands make it a key issue to restoring fiscal stability.